New home prices ticked up last month, but as experts declare a housing recession, falling demand may soon push prices much lower.
New home sales unexpectedly plunged much more than economists projected in July for the second month in a row, and amid the falling demand, rising home prices are starting to slow down—prompting experts to predict long-rising housing inflation could be due for a turnaround soon.... [+]About 511,000 new single-family houses were sold last month on a seasonally adjusted annual basis, plunging 12.
Meanwhile, the number of new houses for sale continued to creep up, climbing by 7,000 to an estimated 464,000—meaning it would take about 10.9 months to sell off the current supply of existing homes—the biggest glut since April 2009, notes Pantheon Macro chief economist Ian Shepherdson, who blames the plunging demand for a recent surge in inventories.
In emailed comments, Shepherdson said"it's reasonable to assume the steepest declines in sales are behind us," as mortgage rates settle at about 5.7% , but he still believes they will fall"a bit further" given that rates are still more than two percentage points higher than a year ago. "For new home prices, however, the worst is yet to come," he says, noting that month-to-month swings can be"wildly erratic" but that the downshift in year-over-year growth is clear and will become more pronounced as inventory continues to rise.
Prices rose 8% in July, compared to one year ago—down from an annual pace of 10.7% in June; also facing falling demand, the median existing home price"At the start of 2021, a lack of existing homes pushed buyers into the new home market and sent prices soaring, but now existing home supply is rocketing too as homeowners scramble to sell before prices fall too far," says Shepherdson, explaining that this will in turn pressure homebuilders to cut new home prices.
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